Cole Sunglasses sell for about $185 per pair Suppose the company incurs the following average costs per par E (Click the icon to view the cost information.) Cole has enough idle capacity to accept a one-time-only special order from European Glasses for 19,000 pairs of sunglasses at $72 per pair Cole will not incur any variable marketing expenses for the order Requirements Requirement 1. How would accepting the order affect Cole's operating income? in addition to the special order's effect on profits what other longer term qualitative) factors should Cole's managers consider in deciding whether to accept the order? Prepare the analysis to determine the effect on operating income (Enter a zero, "O", in an input box if there is no expected change in the expense. Use parentheses or a minus sign for an expected decrease in operating income.) Cole Incremental Analysis of Special Sales Order Expected increase in revenues Expected increase in expenses Variable manufacturing cost Foxed manufacturing costs Total expected increase in expenses Expected income (decrease in operating income In addition to the special order's effect on profits, what other longer torm qualitative) factors should Cole's managers consider in deciding whether to accept the onde? Enter any number in the edit fields and then continue to the next question A. Wil Colo's other customers find out about the lower sale price Cole offered to European Glasses? If so, will these other customers demand lower sale prices? B. How will Cole's competitors react? Will they retaliate by cutting their prices and starting a price war? C. Wil lowering the sale price tarnish Cole's image as a high quality brand? DD. When should the equipment used to produce sunglasses be refurbished and at what cost? Requirement 2. Cole's marketing manager, Jim Revo, agues against accepling the special order because the offer price of $72 is less than Cole's $84 cost to make the sunglasses. Revo asks you, as one of Cole's staff accountants, to write a memo explaining whether his analysis is correct Date To: Mr. Jim Revo, Marketing Manager From: Staff Accountant Subject European Glasses special order When deciding whether to accept a special order, we should compare the extra revenues we will receive against the Costs that we will incur whether or not we fill the order are V to our decision This is why comparing the $72 price European Glasses offered us with our $84 total cost of making and selling the sunglasses is Specifically, we have enough capacity to produce the 20,000 extra pairs of sunglasses for European Glasses' special order without increasing our Our whether or not we accept the order, so these costs are Also, as you know, we will not incur any on the special order. These costs will be the same whether or not we make the additional 20,000 pairs of sunglasses for Enter any number in the edit fields and then continue to the next question Cole Sunglasses sell for about $185 per pair. Suppose the company incurs the following average costs per pair BE: (Click the icon to view the cost information.) Cole has enough idle capacity to accept a one-time-only special order from European Glasses for 19,000 pairs of sunglasses at $72 per pair. Cole will not incur any variable marketing expenses for the order Requirements To Mr. Jim Revo, Marketing Manager From: Staff Accountant Subject European Glasses special order When deciding whether to accept a special order, we should compare the extra revenues we will receive against the Costs that we will incur whether or not we fill the order are to our decision. This is why comparing the $72 price European Glasses offered us with our $84 total cost of making and selling the sunglasses is Specifically, we have enough capacity to produce the 20,000 extra pairs of sunglasses for European Glasses' special order without increasing our will whether or not we accept the order, so these costs are Also, as you know, we will not incur any on the special order. These costs will be the same whether or not we make the additional 20,000 pairs of sunglasses for European Glasses, so these costs are N The extra to fill the special order are if we accept European Glasses' special order, we will incur $ extra cost per pair of sunglasses. Therefore, we should the special order from European Glasses 2 Enter any number in the edit fields and then continue to the next question Save for Later hidle capacity to accept a one-time only special order from European Glasses for 19,000 pairs of sunglasses at $72 per pair. Cole will not incu ng expenses for the order o, Marketing Manager countant Dan Glasses special or Data Table whether to accept a sp will incur whether or not Jean Glasses offered us with of making and selling the have enough capacity Direct materials Direct labour Variable manufacturing overhead Variable marketing expenses Fixed manufacturing overhead it increasing our w, we will not incur any pairs of sunglasses for 20. V on the sses, so these costs are Total cost * $2,100,000 total fixed manufacturing overhead / 105,000 pairs of sunglasses pecial order, we will incur $ pair of sunglasses The Print Done mber in the edit fields al ater